The International Monetary Fund has approved a $2.1bn loan for Colombia, opening the door to almost $10bn in aid from other lenders.

The loan was secured after Colombia's Congress last month approved the higher taxes, spending cuts, and restructuring of pensions and the labour market demanded by the IMF.

The new government of Colombia has embarked on a strong reform programme Horst Koehler IMF managing director

The US, the biggest shareholder in the IMF, has spent more than $2bn in the past three years fighting its "war on drugs" in Colombia and backed the loan.

IMF endorsement of Colombia's economic programme is a signal to the World Bank, Inter-American Development Bank and the Andean Development Corporation that they can release about $9.8bn in aid.

The World Bank is expected to approve a $3.3bn loan on Thursday.

IMF forgiveness

The US-backed Colombian military are fighting Marxist revolutionaries and are trying to shut down the world's largest cocaine industry, for which the US is the main market.

Uribe wants more US military aid

Colombia missed its 2002 deficit target under its last IMF loan programme but was granted a waiver.

The IMF lauded the new Colombian government's economic policies but warned growth this year would be only slightly better than the 1.6% of 2002.

"Confronted with a difficult domestic security situation and a challenging external environment, the new government of Colombia has embarked on a strong reform programme," said IMF managing director Horst Koehler.

The IMF said $264m was available immediately, but made clear it did not expect the Colombia to draw on this or any of the rest of the $2.1bn, which it classifies as a "stand-by" loan.

The benefit of it to Colombia is that it should help the country persuade other potential lenders that it can repay any borrowings, using the IMF money if other means of repayment dry up.

Aid "suspended"

On Sunday, President Alvaro Uribe announced a $1.2bn spending plan which he claimed would create 500,000 jobs.

It involves building 1,000 kms of roads, 10,000 public housing units and expanding healthcare.

When he took office in August, Mr Uribe said by reducing poverty and the official 15% unemployment rate, he would undermine support for the revolutionaries.

US considers elite force unaccountable

Mr Uribe also promised to increase military spending by $1bn annually and to seek more aid from the US.

Earlier this week the US suspended military and financial aid to an elite Colombian air force unit accused of killing 17 civilians in 1998 using a US-made cluster bomb.

The value of the US assistance was not disclosed and it was not said if it would be reassigned.

About $300m has been allocated by the US to Colombia for 2003, 62% of which is military aid and the remainder for economic support.